1. Field of the Invention
The present invention generally relates to a method and a system for providing risk management and more particularly relates to a method and a system for providing risk management by developing ratio scales measures for assessing and mitigating risks.
2. Description of the Related Art
Risk is the possibility of incurring a loss when an event takes place. Rather than referring to a risk, we instead, refer to an event and its likelihood, its impact, and its risk (the likelihood times the impact). Various methods are used to identify risk in events. One way is with a collaborative brainstorming involving participants at possibly geographically separated sites, using a whiteboard to enter events proposed for consideration (as practiced in Expert Choice Comparion).
Alternatively, and possibly used in conjunction, assets are identified and brainstorming is performed for each such asset to suggest events that might occur to diminish the value of the asset. Alternatively, and possibly used in conjunction, objectives (from an organizations objectives hierarchy as practiced in Expert Choice Desktop and Expert Choice Comparion) are considered to suggest events that might occur to diminish the achievement of each objective.
The identification, analysis, and treatment of risk occur in almost every facet of life including personal, business, and government. Whereas the focus of planning is to maximize the achievement of objectives, the focus of risk management is to minimize the expected loss or impact on objectives occurring from events that may or may not occur.
Risk Assessment consists of three parts—the evaluation and quantification of the impact of each event, the likelihood of each event, and the risk of each event. Evaluation and quantification of event impact is a necessary part of risk management. Further, it involves identifying risks, analyzing their likelihood of occurrence and impact on objectives, identifying controls that can reduce the likelihood of occurrence and/or impact on objectives, and allocating resources so as to minimize the expected losses.
Generally, the methods adopted for risk assessment techniques are ordinal measures for risk impact and likelihood, such as numbers 1 through 5. Some may even involve analytical hierarchal process. However, these methods are not accurate and were not giving optimized results. Therefore, there is a need of a system and a method to utilize the measurement of both the likelihoods and impacts of risk events with ratio scale measures.